OP-ED COLUMNISTDid You Hear the One About the Bankers?By THOMAS L. FRIEDMANPublished: October 29, 2011

CITIGROUP is lucky that Muammar el-Qaddafi was killed when he was. The Libyan leader’s death diverted attention from a lethal article involving Citigroup that deserved more attention because it helps to explain why many average Americans have expressed support for the Occupy Wall Street movement. The news was that Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust.

Room for Debate: The Psychology of Occupy Wall StreetReaders’ CommentsReaders shared their thoughts on this article.Read All Comments (211) »It doesn’t get any more immoral than this. As the Securities and Exchange Commission civil complaint noted, in 2007, Citigroup exercised “significant influence” over choosing $500 million of the $1 billion worth of assets in the deal, and the global bank deliberately chose collateralized debt obligations, or C.D.O.’s, built from mortgage loans almost sure to fail. According to The Wall Street Journal, the S.E.C. complaint quoted one unnamed C.D.O. trader outside Citigroup as describing the portfolio as resembling something your dog leaves on your neighbor’s lawn. “The deal became largely worthless within months of its creation,” The Journal added. “As a result, about 15 hedge funds, investment managers and other firms that invested in the deal lost hundreds of millions of dollars, while Citigroup made $160 million in fees and trading profits.”

Citigroup, which is under new and better management now, settled the case without admitting or denying any wrongdoing. James Stewart, a business columnist for The Times, noted that Citigroup’s flimflam made “Goldman Sachs mortgage traders look like Boy Scouts. In settling its fraud charges for $550 million last year, Goldman was accused by the S.E.C. of being the middleman in a similar deal, allowing the hedge fund manager John Paulson to help choose the mortgages and then bet against them without disclosing this to the other parties. Citigroup dispensed with a Paulson figure altogether, grabbing those lucrative roles for itself.” (Last Thursday, the U.S. District Court judge overseeing the case demanded that the S.E.C. explain how such serious securities fraud could end with the defendant neither admitting nor denying wrongdoing.)

This gets to the core of why all the anti-Wall Street groups around the globe are resonating. I was in Tahrir Square in Cairo for the fall of Hosni Mubarak, and one of the most striking things to me about that demonstration was how apolitical it was. When I talked to Egyptians, it was clear that what animated their protest, first and foremost, was not a quest for democracy — although that was surely a huge factor. It was a quest for “justice.” Many Egyptians were convinced that they lived in a deeply unjust society where the game had been rigged by the Mubarak family and its crony capitalists. Egypt shows what happens when a country adopts free-market capitalism without developing real rule of law and institutions.

But, then, what happened to us? Our financial industry has grown so large and rich it has corrupted our real institutions through political donations. As Senator Richard Durbin, an Illinois Democrat, bluntly said in a 2009 radio interview, despite having caused this crisis, these same financial firms “are still the most powerful lobby on Capitol Hill. And they, frankly, own the place.”

Our Congress today is a forum for legalized bribery. One consumer group using information from Opensecrets.org calculates that the financial services industry, including real estate, spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.

We can’t afford this any longer. We need to focus on four reforms that don’t require new bureaucracies to implement. 1) If a bank is too big to fail, it is too big and needs to be broken up. We can’t risk another trillion-dollar bailout. 2) If your bank’s deposits are federally insured by U.S. taxpayers, you can’t do any proprietary trading with those deposits — period. 3) Derivatives have to be traded on transparent exchanges where we can see if another A.I.G. is building up enormous risk. 4) Finally, an idea from the blogosphere: U.S. congressmen should have to dress like Nascar drivers and wear the logos of all the banks, investment banks, insurance companies and real estate firms that they’re taking money from. The public needs to know.

Capitalism and free markets are the best engines for generating growth and relieving poverty — provided they are balanced with meaningful transparency, regulation and oversight. We lost that balance in the last decade. If we don’t get it back — and there is now a tidal wave of money resisting that — we will have another crisis. And, if that happens, the cry for justice could turn ugly. Free advice to the financial services industry: Stick to being bulls. Stop being pigs.

Conrad Black, the former newspaper mogul ordered back to prison to spend another year in jail, could face a series of lawsuits which threaten financial ruin.

The peer, who used to own The Daily Telegraph, has protested his innocence against convictions in the US for skimming money from his Chicago-based holding company, Hollinger International, and of obstructing regulators' investigations into his affairs. Defiant to the end and beyond, Black said in court on Friday that you would have to believe him "barking mad" to have done the things he was accused of.

But, as he returned to prison to serve another 13 months for fraud and obstruction of justice, it was suggested that his failed attempts to clear his name in court may just be the start of his battles.

First, he has asked Canada, the country of his birth, to allow him to return to Toronto when he is released after being told he will be barred from living in America. If that request for normal immigration rules for convicted felons to be waived fails, he could be forced to live in the United Kingdom.

After the small matter of his residency is resolved, Black then faces contests in the civil courts, where a string of lawsuits will be reactivated in the coming weeks.

The Securities and Exchange Commission, the regulator that polices corporate America, is suing, claiming Black defrauded shareholders. It has already been granted an interim judgment that Black should pay $3.8m (£2.4m), but the case has been stayed for the duration of Black's appeals against his criminal convictions. His defence team must put in its next motions by 1 August.

The US tax authorities, meanwhile, are pursuing Black for $71m in back taxes, penalties and interest payments, and his old company is also suing him for hundreds of millions of dollars, claiming that his crimes led to its collapse. That case resumes in August.

George Tombs, a Quebec-based biographer of Black, said he heard pathos in the peer's courtroom oration, which ran to 20 minutes. "He talked as if he were Napoleon returning from Elba, but the army he claims is made up of inmates from Coleman prison. What kind of army is that? How does a person who has been roundly defeated continue to pretend that defeat is victory?"

Mr Tombs says that Black intimated in a 2006 conversation that he had protected himself financially well enough to ensure funding for these legal actions, but that with up to $1bn in claims against him, he faces an uncertain future.

The writer said: "He has to lay out huge amounts of money in legal fees, and he is not able to earn anything except the 12 to 18 cents an hour he gets teaching English in prison. He has had to sell his place in Palm Beach, and to remortgage the home in Toronto. He has suffered greatly from the meltdown of Hollinger, and he has already paid serious amounts of money back to the US government. Yet I do believe he has considerable resources still."

Black can claim one recent legal victory, a settlement of a libel action he launched against Hollinger and the authors of an internal report that accused him of operating a "corporate kleptocracy". The trustees of the now-bankrupt company decided not to defend the suit.

Black and his wife, Barbara Amiel, have been living in a New York hotel since he sold their Florida mansion for $25m in April.

The Canadian authorities can issue an immigration visa to a convicted criminal after his "rehabilitation", but this is usually only after five years have elapsed.

In court on Friday, Black's lawyers said he was "devastated" at being barred from the US. Carolyn Gurland said: "His daughter lives here; many of his closest friends are here. He is not just a casual observer of this country but, I am reliably told, he can recite the vice-presidents of the US in order. He is writing a third book on US history, and he lectures on US history from memory." He will be a guest of the US government, now, for a while longer – but not much longer.

On Friday, a Chicago court slashed Black's sentence from 78 months in the light of a Supreme Court ruling that voided two of his three fraud convictions. The new 42-month jail term was still more than the 29 he had served before being freed last year, pending resentencing.

His legal team has yet to decide whether to request his return to the Coleman correctional facility in Florida, where he served the first part of his term, or whether to ask for a placement nearer the Canadian border, to make it easier for his sick wife to visit.

Black will be granted the return of his passport so that he can prepare to leave the US as soon as he is released. "Better get the photos done," Judge Amy St Eve joked to his lawyers on Friday.

He didn't believe that fraud was something that needed to be enforced or was something that regulators should worry about, and he assumed she [Brooksley Born] probably did. And of course she did. I've never met a financial regulator who didn't feel that fraud was part of their mission, but that was her introduction to Alan Greenspan."

Indeed, as Born pointed out last year, Greenspan told her:

I don’t think there is any need for a law against fraud.But, this week, Greenspan admitted in testimony to the Financial Crisis Inquiry Commissioner that regulators do need to crack down on fraud:

This week, in response to a question from Financial Crisis Inquiry Commissioner Heather Murren, who asked Greenspan whether subprime lenders should now be supervised by the Federal Reserve, Greenspan said:

"Well, first of all, remember you have to distinguish between supervision and enforcement. A lot of the problems which we had in the independent issuers of subprime and other such mortgages, the basic problem there is that, if you don't have enforcement, and a lot of that stuff was just plain fraud, you're not coming to grips with the issue."

In a paper on the financial crisis he presented last month at the Brookings Institution in Washington, Greenspan did not mention the word "fraud", in any of its forms, even once in the 66-page presentation.

His prepared remarks this week, though, mentioned it three times.

"[I]t is one thing to promulgate rules, and quite another to successfully implement them. Rules to prevent fraud and embezzlement have failed as often as not. Parenthetically, in the years ahead, we will need far greater levels of enforcement against misrepresentation and fraud than has been the practice for decades," he told the investigatory panel.Greenspan also called for "enhanced" enforcement against "misrepresentation and fraud" going forward as one desired part of the government's arsenal in trying to avoid future crises in which taxpayers are forced to bail out private companies.

And the Wall Street Journal is running an important story showing that all of the big bank primary dealers - not just Lehman - have engaged in fraudulent accounting for years:

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

The fact that the existence of widespread fraud is finally being addressed in polite company is a good first step.

But where are the prosecutions?

Neither happy talk nor propaganda will fix the economy. The governments of the world have spent trillions trying to wallpaper over the fraud, and have become insolvent doing so.

But it's not working. Indeed, polls show that people no longer trust our economic "leaders". See this and this.

Only honest talk - and holding the people who committed fraud accountable - will stabilize the economy

The House proceeded to the consideration of Bill C-21, An Act to amend the Criminal Code (sentencing for fraud),House of Commons DebatesVOLUME 145

NUMBER 117

3rd SESSION

40th PARLIAMENT OFFICIAL REPORT (HANSARD)

Tuesday, December 14, 2010

Speaker: The Honourable Peter Milliken

Hon. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): There is another point of white collar crime that the bill does not address. That is the issue that it does not in any way, shape or form attach these criminal offences to institutions. I would like to read an article by Darcy Henton that was published in the Edmonton Journal on May 5, 2010, headlined “Alberta wary of white-crime bill”. It states: A white-collar crime bill reintroduced by the federal Conservatives this week received a lukewarm reception Tuesday in Alberta from both a financial crime crusader and a fraud victim. The justice bill, which had to be reintroduced after it died on the order paper when the prime minister prorogued Parliament last winter, sets a mandatory minimum two-year sentence for frauds over $1 million. (1055)

The bill also requires judges to look at several aggravating factors that could increase the sentence and to consider victim impact statements and restitution. Retired investment broker Larry Elford, who advocates on behalf of investors, said the new bill still appears to contain a loophole that exempts it from being applied to investment institutions. “It's a wonderful gift to the investment industry,” he said. “It would exempt the largest fraudsters in Canada. I can't understand why they would reintroduce the law with the same loophole.” Elford said the law wouldn't apply to corporations like Goldman Sachs which is currently the subject of a civil fraud suit brought on by the Securities and Exchange Commission, the national securities regulatory authority in the U.S. “Any Bay Street operator could sell any product in any fraudulent and misleading manner and this bill would not apply,” Elford said. Edmontonian Jason Cowan has been pressing for tougher white-collar crime laws since he and a partner were allegedly defrauded of more than $2 million in 1996. “I think it's absolutely necessary that there are some checks and balances,” he said. “These white-collar criminals are getting off all the time.” [The federal justice minister] said the legislation will make jail mandatory for fraudsters who bilk their victims out of more than $1 million. “Our government is standing up for victims of white-collar crime,” he said when the bill was reintroduced Monday. The justice minister then waited over 200 days before moving second reading debate. That is really what I would call standing up for victims of crime: using their misery, using their hardship as a political ball game. It is shameful.

(advocate comments.....time will tell how much cost to Canadians will incur from this "gift" of letting public markets fraudsters (investment bankers) be unaffected by this bill. It could be of no importance, but it also could be letting the largest fraudsters in the country off the hook. Five big banks marching in monopoly lock step means they get to do pretty much what they wish in Canada)

The Ontario Securities Commission has reprimanded an Ontario mutual fund and insurance salesman for his role in a foreign exchange investment scheme, and the unauthorized selling of securities. On Oct. 1, the OSC approved a settlement agreement reached between OSC staff and Wilton J. Neale, Multiple Streams of Income (MSI) Inc. and 360 Degree Financial Services Inc. [ FSCO licensed] Neale was licensed as a salesperson of Keybase Financial Group Inc., a dealer registered in the category of mutual funds dealer, from Feb. 18, 2006 to Jan. 18, 2007 when he was terminated for cause. The majority of the investors lost all or substantially all of their $1.3 million invested capital. As that capital had been borrowed from AGF Trust, they remain indebted to AGF Trust for the amounts of their RSP loans.. Sad., very sad. http://www.investmentexecutive.com/clie ... ilNews.asp? Id=55175&cat=8&IdSection=8&PageMem=&nbNews=&IdPub=

(((We at the OSC are pleased and proud to show how we can catch and punish the smallest time crooks on a once off basis. It means that we can let our friends at the largest institutions in Canada get away with Billions every year, while we hold up the minnows to pretend we are effective. Don't print this last part in any public media announcements)) OSC chair

“The [ FMF] settlement really puts into question BMO's motives and at the same time shows how useless the OSC is. They conduct a five-year investigation, [that shows] obvious wrongdoings by BMO, with an end result of nothing. BMO breaks even, investors out many millions, let's turn the page" - broker commenting on miniscule OSC penalty regarding the FMF business income trust IPO fiasco . Source: Barry Critchley, , OSC slaps BMO with a feather, FP, Nov. 13, 2010 http://www.financialpost.com/opinion/co ... story.html The petty fine amounts to just 1.7 % of the $197,500,000 lost by retail investors. BMO earned $4.41 million in fees related to the underwriting, plus another $659,895.03 on the sale of subordinated notes."...Derek Ferris, a lawyer for the OSC, said the [ FMF] financial settlement falls within a range of what would be expected at the end of a contested hearing, and saves time on what has already been a long and complicated process. He said the regulator collected some 230,000 documents and interviewed 35 witnesses in Canada and the United States during its investigation. The bulk of the $3.3-million settlement is to go "to or for the benefit of third parties." The remaining $300,000 is to help pay the costs of the OSC investigation. BMO will also be formally reprimanded by the commission..." Source: http://www.financialpost.com/settlement ... story.html [ The $300,000 assignment of costs for the investigation amounts to about $1.30 per page collected .A class action lawsuit was launched that included allegations against BMO and a raft of others involved with the struggling company. It was settled in 2006 for $29-million, and approved the following year. The OSC needs a lot more time before issuing micro wrist- slap penalties that actually encourages wrongdoing . Anyways, congrats to BMO's legal counsel- Well Done ]

A disturbing tale: Ontario's Attorney General Chris Bentley says he is investigating why criminal charges were dropped against a Toronto man accused of operating a multimillion-dollar Ponzi scheme. According to a report filed by a court-appointed receiver, Tzvi Erez, 43, used a series of expertly forged documents to defraud more than 70 investors of $27 million. http://www.cbc.ca/canada/toronto/story/ ... 6/ontario- ponzi.html Let's face it, Canada is a paradise for white collar criminals , organized crime and Jihadist terror groups.

Third World North America................Cause and Solution in 400 wordsBy Larry Elford Sept 12, 2010

Problem (as I see it)

Banksters have been raping and abusing the public financially for decades or longer.

Banksters went too far and they killed the economy this time.

Banksters or criminals who do crimes in excess of $100 million dollars are usually unable to prosecute.

Perhaps it is due to $100 million dollar crimes needing the help and assistance (or simple moral blindness) of politicians, regulators and legislators to help them commit these crimes.

Solution:

We need laws, police, regulators and prosecutors, who are able to prosecute $100 million dollar (and up) criminals and jail them along with jailing those politicians, regulators and legislators who are found to be selling out the public interest by sleeping with our mega-criminals. Or turning a blind eye to them for political or other favors.

Further, we need to establish an entire new industry, the industry of accountability which employs good people as whistleblowers, investigators, litigators, police, prosecutors, accountants, auditors etc., etc to ferret out crimes and financial violence against the public, and to make sure that they are caught and prosecuted.

This would be a dramatic shift from how the talents of many of these people are today wasted by a systemic drive to corrupt and capture talented people to help perpetrate $100 million (and up) dollar crimes. (the biggest crimes, you may have noticed seem to be done by our largest and most trusted financial institutions, and we must, MUST stop treating these corporate kleptomaniacs as if the are so solid as to be “above examination”.

(If $100 million is not the correct number for your case or your country, please substitute accordingly. It will be up to history to determine the figure, but in my personal estimate and experience, crimes of $100 million (in Canada) are simply above the capabilities of our current justice system to deal with. They are crimes that pay and pay very, very well. USA is slightly ahead of Canada in putting bad people in jail, but seriously, have you ever seen a mega-criminal jailed in Canada? A $100 million dollar criminal? No.Here in Canada it would be considered rude, impolite and far too bold to treat wealthy people like...........criminals.

From my local newspaper today, I was informed that former Norbourg president Vincent Lacroix is getting out on parole on sept 27, 2009.

In December 2007 he was convicted of 51 securities violations and sentenced to 12 years, less a day. The sentence was later reduced to 8.5 years and then reduced again to five years less a day.

Now he will be out in less than two years. He was convicted of defrauding 9,200 investors.

Yippee, Canada is the best country in the world..........for crooks. It is a free ride for financial criminals here. What an economic development message to send the world. Come to Canada and do the crime, without having to do the time. I am becoming more than a skeptic. I am truly becoming a cynic.

Drabinsky’s Slow Motion Justice, Canadian Style http://finlayongovernance.com/?p=1664JULY 8, 2009The long-running Livent legal drama shows that what passes for Canadian justice among white-collar offenders remains something of a mystery, like a glacier that moves imperceptibly.

You have to wonder what Livent’s former investors are thinking, or what others might be learning, about Canadian justice. First of all, there were four convicted criminals on Livent’s board, which we were the first to note here. That would be a record if it were not for Hollinger’s boardroom, which boasted a grand total of six felons.

Next, they have had to contend with the iceberg that is Canadian justice. Garth Drabinksy and Myron Gottlieb were both charged with fraud in U.S. federal court in 1999. It wasn’t until 2002 that they were charged in Canada. Six years later the trial began, and last March a conviction was handed down. In a much shorter span of time, Martha Stewart, Jeffrey Skilling, Sanjay Kumar, Dennis Kozlowski and Conrad Black, to name a few, were all charged, convicted and put behind bars. Some are still there. Livent’s duo were convicted in March of this year. They will not be sentenced until mid-August, seven years after the Canadian charges were filed. There will be appeals that will keep the crafty pair out of jail for many years. Along with an appointed senate and a system where the prime minister selects judges for the supreme court and all other top courts without any constitutional checks or balances whatever, what passes for Canadian justice as it pertains to the errant white- collar community remains something of a mystery. Nortel’s former CEO has yet to see the inside of a courtroom. The Ontario Securities Commission seems to have forgotten about Hollinger and dropped an appeal in a high profile case it lost. No one was ever convicted in the Bre-X fraud, the largest crime of its kind in mining history. None of this, including the lethargic handling of the current Livent case, is likely to change the image that Canada is soft on white-collar crime.

If that playbook is followed, Livent’s founders will spend a relatively short time in prison. A sentence of between two-and-a-half and three-and-a-half years would not be surprising given the leniency Canadian judges have shown toward miscreants in the boardroom. These courts have little trouble expressing outrage over a single mother who passes bad cheques. When it comes to rich tycoons or theater impresarios, their disdain appears more muted, almost apologetic, for having to find someone guilty. Livent’s founders will regain some measure of freedom within months of beginning their sentences. Some of Judge Mary Lou Benotto’s decision reads in places like a publicity brochure for one of Livent’s productions and in others could pass for the citation during the awarding of an Order of Canada medal (which Mr. Drabinsky holds).

As to the proposal put forward by Mr. Drabinsky’s lawyer that his sentence include no prison time but rather a speaking tour on the topic of ethics in business: In this fictional portrayal worthy of the stage, Mr. Drabinsky would find himself in the company of an interesting cast. Ken Lay used to give such speeches before his conviction in the Enron case. Bernard Madoff, when he chaired NASDAQ’s board, was seen as a strong advocate of robust industry regulation on Wall Street. Michael Edwards, a former chairman of the Toronto Stock Exchange, was also considered a proponent of ethical and governance reforms, until he was penalized by the Ontario Securities Commission for his failures in the RT Capital (then a division of the Royal Bank of Canada) scandal some years ago. He was also a member of the committee that brought forward the Exchange’s 1994 landmark corporate governance guidelines. It was later discovered that he chaired a board at RT Capital that never actually met. Ethics, it seems, is the last available refuge for the corporate scoundrel.

Having looked at the subject over several decades and given more than my share of speeches and media interviews on it, as well as advice to several governments and major corporations, I have found that it is a good idea for one to know something about the subject of ethics before claiming to extol it. It requires a commitment to ethics as a core value, not as a convenient tool to avoid prison or promote good public relations. Ethics might also entail some knowledge of right and wrong. As far as Mr. Drabinsky is concerned, there has been no demonstration of remorse or appreciation for the wrong he committed and the injury he caused.

Canadian justice has moved at its customary glacial pace since the fraud at Livent was alleged in the Manhattan Office of the U.S. Attorney. Perhaps all investors and advocates of a higher standard of justice in the boardroom and enforcement by Canadian regulators and the courts have left is the hope that by the time the sentence is handed down next month, it will not have melted into a puddle of meaningless platitudes where the offenders pay with empty words instead of a significant measure of their freedom.

The U.S. Securities and Exchange Commission t has settled charges against TD Ameritrade, Inc. over allegations that it made inaccurate statements when selling Auction Rate Securities. Similar to other settlements with firms over their Auction Rate Securities (ARS) sales, this deal will provide its customers the opportunity to sell any ARS bought prior to the collapse of the market for these securities (in February 2008) back to the firm. The SEC previously announced settlements over similar issues with Citigroup and UBS, Wachovia, Bank of America, RBC Capital Markets, and Deutsche Bank. According to the SEC's administrative order, TD Ameritrade's registered representatives told customers that ARS were an alternative to certificates of deposit and money market accounts, although they are actually very different investments. Among other things, it also claimed that the firm's reps did not tell customers about the complexity and risks of ARS, including their dependence on successful auctions for liquidity. The commission censured the firm, ordered it to cease and desist from future violations, and reserved the right to seek a financial penalty against the firm, which consented to the order without admitting or denying the SEC's allegations. http://www.sec.gov/news/press/2009/2009-163.htm and http://www.sec.gov/litigation/admin/2009/33-9053.pdf

“I've turned over files to the RCMP and nothing happens,” laments Al Rosen, the forensic accountant. “We just don't have people who are trained in what to look for. We have bad securities acts. We have bad sentencing guidelines. We've had some bad court decisions. We're 80 years behind the U.S. If you're a crook, this is the best place to be.”

from

Want to be a corporate criminal? Move to CanadaThe Globe and Mail

The real message sent to white-collar crooks likeGarth Drabinsky is that, even if you get convicted,things won't be so bad

OUTSIDERS tend to think of Canada as a wholesome, boy-scoutish kind of place. Many Canadians have the same view. Yet their country is as shockingly slow as many in Latin America when it comes to dealing with allegations of corruption and white-collar crime, as a rash of recent cases demonstrates.

Public hearings began this week in a judicial inquiry into the relationship between Brian Mulroney, a former prime minister, and Karlheinz Schreiber, who was once a lobbyist for Airbus and for Thyssen, a German defence and steel company. The matter under investigation dates back to 1993, when Mr Mulroney is alleged to have accepted the first of three envelopes stuffed with cash from Mr Schreiber. It is six years since these payments became public knowledge.

Yet the inquiry is the first attempt by the government to get to the bottom of the affair. Mr Mulroney says that the cash—C$225,000 ($170,000 at the time) he says; C$300,000 says Mr Schreiber—was payment for lobbying work carried out after he ceased being prime minister, and he insists he has done nothing wrong. But should the inquiry’s findings lead to criminal charges against him, the subsequent trial would probably drag on for several more years.

This is what happened in the case of Garth Drabinsky and Myron Gottlieb, two Canadian theatre impresarios from a company called Livent who were convicted of fraud on March 25th. They were indicted in the United States in 1999, and promptly fled to Canada where they were not charged until 2002. Justice has moved only slightly faster in the case of Larry O’Brien, the mayor of Ottawa, who was charged 16 months ago with trying to bribe an opponent in an election in 2006. His trial begins next month.

Canadian sloth in these matters is shown up by American zeal. Conrad Black was jailed for fraud south of the border but was never charged in his native Canada, although some of the press baron’s offences were committed there. The contrast stems in part from differences between legal systems. America’s grand juries, which have no counterpart in Canada, allow investigators to subpoena witnesses and require them to testify under oath. Plea bargaining provides another tool to extract evidence. Canadian police must rely on voluntary co-operation from busy businessmen. If they procrastinate, cases may be dropped because witnesses die or because of undue delay, as happened with Robert Topol, a third Livent manager. Another time-consuming Canadian procedure requires police to disclose all documentary evidence when they file charges.

A bigger factor may be public attitudes. Canadians tend to defer to authority and trust their institutions. Although the main parties, the Liberals and the Conservatives, play up corruption claims to gain political advantage, their outrage rarely provokes a public groundswell in favour of speedy action or change. The exception was a scandal over Liberal advertising spending, which cost the party the 2006 election.

The Liberals have had little success in trying to tar Stephen Harper, the Conservative prime minister, with the problems of Mr Mulroney, who formerly acted as a mentor to him. Mr O’Brien has refused to step down as Ottawa’s mayor. The Canadian Broadcasting Corporation plans to air a new series of a talent show in which Mr Drabinsky is one of the judges. Mr Mulroney continues to sit on several corporate boards. “Canadians are complacent about these things,” says Tony Coulson of Environics, a polling firm. At this rate they won’t earn their boy-scout’s badge for housecleaning.

with the caveat that investoradocates.ca is MOST concerned with fraud artists, those professionals who practice "secret" thefts from the economy and from their trusting clients................verses plain vanilla crooks who out and out steal. The difference is that crooks are visible, catchable and obvious, so they need nothing more than effective securities police to stop. Fraud artists, on the other hand, the kind that investoradvocates is more interested in outing, are those pros inside the system, who run the system, run it to their own benefit, police it to enrichen themselves, and prey upon our economy with total impunity.

Below is a list of mostly crooks, who mostly just plain stole, and got caught. I think the hidden fraud inside our system is ten fold more damaging, but I include this list here for interest sake.

News from globeandmail.comCOLLECTED WOES

Friday, November 24, 2006They mesmerized their followers in the business world with their brilliance-- until a brush with the law broke the spell. What became of these fallen titans? Our investigative reporter works his way through the entire setPaul WaldieConrad Black

Conrad Black has spent more than $20 million defending himself, and by all accounts he is just getting started.

For the last three years, the former press baron has been fending off dozens of civil lawsuits in Canada and the United States, but his main focus now is preparing for a criminal trial expected to start in March in Chicago. Lord Black has rejected any suggestion of a plea bargain, and he has given just as good as he has received from prosecutors, who spent much of this year attempting in vain to have Black's bail revoked.

This past summer, Hollinger Inc. won a court-ordered freeze on Black's assets as part of a lawsuit unrelated to the criminal charges. But even that freeze, modified by a deal he struck later with Hollinger, has not slowed Black down. Although he owes roughly $25 million, sources say he is making his payments on time. And Black, 62, managed to make a $500,000 donation over four years to Toronto's Four Seasons Centre for the Performing Arts. He's working on a book about former U.S. president Richard Nixon, and he writes a regular column in the National Post. In an e-mail to author Lawrence Martin this year, Black revealed that he has a consecrated chapel in his Toronto mansion that he visits frequently.

Lord Black has had to part with some of his prized possessions, including his $30-million house in London, a $10.5-million (U.S.) apartment in New York and a 1957 Rolls-Royce Silver Wraith, which sold for $126,500 at an auction last June.

David Radler

Then: Conrad Black's right-hand manWhat happened:charged with fraudNow:pleaded guilty to one charge; running a newspaper company

Not much has been heard from David Radler since he scurried out of a Chicago courtroom last year after pleading guilty to one charge of fraud. Under a plea agreement that will see him spend 29 months in prison, Radler is expected to be a star witness for the prosecution against his former colleagues at Hollinger International Inc., including Conrad Black.

For 36 years, Black and Radler were virtually inseparable. Together, they built a newspaper empire that peaked at 600 titles in Canada, the U.K., the U.S. and Israel. But in late 2004, a year after allegations surfaced about wrongdoing at Hollinger International, Radler began quietly co-operating with U.S. prosecutors. It's hard to know what prompted him to give up his old friend, but the death of Radler's father in June, 2004, might have been a trigger.

Things haven't been easy for Radler, who's now 64, since he made his plea agree-ment in September, 2005, and was re-leased on $500,000 (U.S.) bail. Queen's University announced it was stripping his name from a wing of its business school and giving back his $1-million donation. At the request of Hollinger Inc., a B.C. court has put a freeze on Radler's assets, limiting his spending to $25,000 a month. (Radler can still challenge the order.)

Radler spends much of his time in Van-couver, where he's trying to keep up with his main business venture, Horizon Operations Ltd., and its stateside sister, Horizon Publications Inc. Horizon owns about 40 small newspapers in the United States and Canada. But even this enterprise has a cloud over it. In a document filed in court, prosecutors have alleged that when Black and Radler bought papers for Horizon from Hollinger, they "negotiated an agreement with themselves," producing a discount price. Black has denied the allegation. The two remained co-owners of Horizon until earlier this year, when Black sold his stake for around $16 million, according to court filings. The two men are believed to still jointly own another company, Bradford Publishing Co.

Documents filed in court show that Radler has had to work at keeping Horizon afloat. In a memo dated March 3, 2006, he told Horizon debt holders, who included Black, that it was possible the company would need to raise more capital to meet an upcoming financial obligation. Another in-ternal e-mail from a lawyer, dated around the same time, discusses the difficulties the Horizon companies were having in making quarterly pay-ments on a credit facility. And a transcript of a voice mail dated June 22, 2006, also filed in court, indicated that Black was causing some difficulties for Horizon by not agreeing to sign an unspecified extension agreement with banks.

This fall, Radler got back to his roots when he became a partner in the Sherbrooke Record, where he and Black began their newspaper careers in 1969.

Robert Campeau

Then: headed a retail and real estate empire

What happened: companies filed for bankruptcy

Now: running out of money

Robert Campeau's lawyers figure he'll be flat broke by February--a sad fate for someone once celebrated as one of Canada's best-known businessmen and one of the 10 sexiest men alive.

In the 1980s, Campeau orchestrated two stunning takeovers in the United States, a $3.5-billion (U.S.) acquisition of Allied Stores Corp. and a $6.6-billion (U.S.) deal for Federated Department Stores Inc. Between the stores and his real estate holdings, Campeau's empire was worth an estimated $10 billion. Campeau, who'd come from nothing, capped his achievement by building a 30,000-square-foot, chateau-style mansion, complete with 13 bathrooms, on Toronto's exclusive Bridle Path.

But by 1990, Campeau Corp. was buckling under its debt, and Allied and Federated filed for bankruptcy protection. Ousted from the company, Campeau retreated to Austria with his second wife, Ilse. A planned come-back building housing in Berlin did not come to fruition.

Campeau returned to Canada in 2001 suffering from clinical depression. While being treated in Guelph, Ontario, Campeau learned that "my marriage to Ilse of 31 years had ended," according to a document filed in court. The relationship had been in trouble for years. Campeau was already involved with Christel Dettmann, whom he had met in Berlin.

For the past four years, Robert and Ilse Campeau have been locked in a legal battle. In 2003, Robert won a court order requiring Ilse to turn over $9 million as part of the division of the family's assets (Campeau put almost everything in his wife's name during his career). She was also ordered to pay $25,000 a month in support. Robert has also moved to seize three condos Ilse owns in Toronto, worth almost $3 million in total.

Ilse, who is 66 and lives in Austria, has refused to pay anything. She's also contesting the property seizures, in part through a website (Ilsa.at) that offers her side of the story.

On top of all that, Campeau is being sued by his daughter from his first marriage, Rachelle. She is seeking repayment of roughly $2.5 million she lent Campeau more than a decade ago. The case, which started in 1996, is slated to go to trial in May. Campeau has always insisted that he wants to pay the money back--but he can't, because Ilse has everything.

While the lawsuits fly, Campeau, 83, spends most of his time in a townhouse in Ottawa, living on what's left of his savings. He had visions of starting a new housing development on the outskirts of town, but that fizzled because the land was tied up by Ilse.

He still has a few powerful connections.

Former prime minister Jean Chrétien and former Liberal cabinet minister André Ouellet have been approached for some friendly help to get Campeau back some cash that was frozen by the lawsuits over Campeau Corp.'s collapse.

Donald CormieThen: founder of the Principal Group Ltd.

What happened: found guilty of misleading investors under the Competition Act

Now: living in Arizona, finally out of the legal mess

Donald Cormie once epitomized the gung--ho spirit of Western Canada. Born in Edmonton in 1922, he traded in a brilliant legal career in the early 1950s to try his hand in business. Within a few years, he had launched what would become the Principal Group, specializing in real estate financing.

By the 1980s, the company had more than $1 billion in assets and was Alberta's only homegrown financial institution, comprising a trust company, a mutual fund arm and even a bank in the Cayman Islands. The fruits of success for Cormie included homes in Edmonton, Arizona and Victoria, an 18,000-acre ranch and a 41-foot yacht.

Trouble surfaced in June, 1987, when auditors cried foul at two Principal Group entities, First Investors Corp. and Associated Investors of Canada Ltd. The provincial government moved in and shut them down. Within weeks, Principal it-self was bankrupt. Some 67,000 investors were out nearly $500 million. The debacle produced a litany of lawsuits, a massive provincial inquiry and bailouts totalling nearly $140 million.

A 1989 court-commissioned report found evidence of fraud and dishonesty on the part of key company executives. But the RCMP said it couldn't find any evidence of criminal conduct, and decided not to lay charges. Cormie was fined $500,000 under the federal Competition Act after pleading guilty in 1992 to charges of misleading advertising and deceptive marketing practices. He was also banned from trading on the Alberta Stock Exchange for 10 years. Many of his assets, including the ranch, were sold to cover debts.

After the Principal Group went bust, Cormie headed to Paradise Valley, Arizona, with his wife, Eivor. The couple lived there until a year ago, when they moved to upstate Scottsdale after Cormie, 84, suffered a period of ill health. He still manages to travel to Canada and gets around to visit his eight children.

According to one of his sons, Bruce, the legal battles cost Cormie $10 million in legal fees and dragged on until last March, when the Canada Revenue Agency finally signed off on a transfer of money that had been tied up in a trust.

According to Bruce, Cormie never could start another business after the Principal Group debacle because he spent all of his time with lawyers and accountants sorting through the company's ruins. When asked if his father was bitter, Bruce said, "He just took it in stride. I've got to hand it to him. I'm amazed at how cheerful he remained throughout the whole process."

Ever the businessman, the elder Cormie also regrets missing out on the recent good times in Alberta. "We missed the biggest boom in history," Bruce said.

Jeannette Walsh

Then: wife of Bre-X Minerals founder David Walsh and company corporate secretary

What happened: Bre-X collapsed in 1997

Now: spends most of her time in the Bahamas

Life was tough for Jeannette Walsh immediately after Calgary-based Bre-X crashed. Lawsuits flew, investigations were launched and most of the family's assets, estimated at $30 million, were tied up in court. Meanwhile, two masked gunmen broke into the Walsh home in Nassau, Bahamas. They tied up David Walsh and threatened to shoot him unless he turned over all his money. The incident ended peacefully, but three weeks later, on June 4, 1998, David died of a brain aneurysm.

Jeannette, now 62, has spent her time stoutly defending herself and her husband. She still lives in Nassau, but spends a great deal of time in Montreal, her hometown. Most of the lawsuits surrounding Bre-X's collapse have gone dormant or faded away, including a big class-action in the U.S. that was dismissed in 2005. Sources in the Bahamas say Jeannette still has some hefty legal bills to pay, but she did win a court order releasing the family's assets. Meanwhile, she's been dabbling in business and bought a commercial property in Nassau, one source said. She has also reportedly sold the family's oceanfront home and moved into an apartment on Paradise Island.

The Walshes' son, Brett, who fiercely de-fended his father, faced an assault charge in 1997 after scuffling with a TV cameraman outside the Bre-X office. The charge was dropped a year later, after Brett agreed to pay $452.78 for a camera. Brett now lives in the U.K., where he is producing a film version of Christopher Buckley's novel, Little Green Men.

As for Bre-X, it is still in bankruptcy, and its trustee, Ross Nelson, continues to plug away. In an attempt to recover billions of dollars for creditors, he launched a lawsuit in 1997 against several former Bre-X officials, including the estate of Walsh. The suit hasn't been active in years, but Nelson said he may reactivate it once there is a verdict in the insider-trading case of former Bre-X geologist John Felderhof.

Michael Holoday

Then: star broker at First Marathon Securities Ltd.

What happened: charged with 15 counts of fraud in 1996 for ripping off clients

Now: trying to get full parole

When Michael Holoday was sentenced to eight years and nine months in jail in 2001, the judge described him as "a dangerous man" who charmed and defrauded "everyone who came in his path." Holoday had swindled dozens of clients, inclu-ding his mother-in-law. He cost his victims about $22 million, one of the largest cases of fraud by a single broker in Canada. He did it all while enjoying a lifestyle that included a Porsche, a Jaguar, a 600- horsepower speedboat and a planned Car-ibbean retreat. Even when he was out on bail after his arrest, Holoday tried to manipulate accounts at three banks.

Now 42, Holoday has been trying to win full parole for four years. National Parole Board reports show that he was released on day parole in 2002, but it was revoked the following year due to his "deceitful and manipulative financial/business dealings and for withholding information from those supervising [him]," the board said in a ruling. The board added that police had considered charging Holoday at the time over his role in an unnamed company where the CEO was charged with fraud.

Holoday managed to win day parole in December, 2004, but it was revoked again in October, 2005, "due to concerns about credibility and about the affordability of your lifestyle," the parole board said. He was put back on day parole two months later. Two subsequent attempts at full parole have been denied by the board.

Parole board records show that while out on day parole and living in a halfway house, Holoday piled up debts, lived beyond his means and misrepresented himself. He managed to get a job with an employment recruitment firm--and almost immediately began borrowing money from his boss.

In its decisions, the parole board uses phrases like "disingenuous manipulation" and "apparent lack of concern for others" to describe Holoday. By law, he can try for full parole again in a few months. In any case, his sentence is up in 2009. Apart from prison, there's the matter of $2.1 million in restitution he owes his victims.

Christopher Horne

Then: star broker at RBC Dominion Securities

What happened: pleaded guilty to 18 counts of fraud

Now: living in downtown Toronto

Christopher Horne was once compared with Cary Grant--tall, dark and charming. Born in the U.K., Horne immigrated to Canada in 1971 at the age of 29. In Toronto, he joined a forerunner to RBC Dominion Securities Inc. as a broker, and quickly gained a reputation as a suave salesman. He had a knack for attracting elderly clients, particularly women, some of whom became so devoted that they included Horne in their wills.

As his client list grew, Horne indulged his passion for art. By the early 1990s, he was one of Canada's top collectors, owning works by Henry Moore and Henri Matisse in a collection valued at roughly $4 million. Horne's contribution to the art scene, which included several large donations to galleries, was so extensive that the Art Gallery of Ontario elected him a trustee in 1988 and put his name on a room.

But in late 1993, one of Horne's clients complained to the firm about problems in his account. Horne blamed administrative staff for the errors. In July, 1994, when bank officials started asking tough questions, Horne abruptly resigned. Police soon discovered that $7 million of client money had been used to finance Horne's art collection.

Horne pleaded guilty to 18 counts of fraud in August, 1996, and received a five-year prison term. His art collection was sold off at rock-bottom prices to help cover a string of debts.

Horne, now 64, was paroled after spend-ing about 10 months in jail. He has kept a low profile ever since, but acquain-tances say he lives in a condominium near Toronto's Distillery District, where he goes for walks with his beloved dog. He still lives with his long-time partner, Douglas Bradley, who has stuck by him for nearly 30 years and once held two jobs to support Horne.

Horne's private foundation, the Christopher E. Horne Charitable Foundation, is still active, although its latest financial report showed no assets. In its 2005 filing, the foundation listed its directors as Bradley and Toronto gallery owner Olga Korper, once a close friend of Horne's.

Korper knew nothing about the foundation when contacted recently. "Good heavens," she said with a laugh. "Golly, I'm not even too thrilled to hear that I am a director on it."

For his part, Horne was not eager to chat when reached at home. "I have nothing to say about anything," he said politely. "Bye."

Ron & Loren Koval

Then: ran King's Health Centre in Toronto

What happened: pleaded guilty to a $100-million fraud

Now: Ron Koval is bankrupt, but Loren Koval is hard at work

Anyone who set foot in the King's Health Centre in downtown Toronto couldn't help but be impressed. After all, Ron and Loren Koval modelled it after the famous Mayo Clinic in Minnesota, but catered exclusively to wealthy clients who could pay for expensive procedures. Along with health services, they offered everything from massage therapy to an indoor golf school when the centre opened in 1996.

The Kovals poured $20 million into re-novating the building in plush style, and had bold plans to equip it with the latest in medical technology. Their own life-style mirrored their clientele's: a $300,000 Bentley, a $150,000 Mercedes-Benz, a yacht, two homes and a permanent hotel suite in Toronto.

But on Oct. 17, 2000, the Kovals vanished, leaving the centre's more than 200 staff scrambling. At least $15 million had gone missing, and police issued Canada-wide arrest warrants for the Kovals. Over the next two months, police and reporters chased tips about the couple's whereabouts across the Caribbean and Central America. There were reports they had disguised themselves with plastic surgery and had stashed millions of dollars offshore. Meanwhile, the health centre closed and lawsuits flew.

The couple turned out to be lousy fugitives. They'd had no plastic surgery, and in 10 weeks on the lam had only made it as far as Savannah, Georgia, before the stress of being on the run took its toll. Carrying a suitcase stuffed with $1.29 million (U.S.) in cash, they returned to Canada by cab and surrendered to customs officials.

The cash was just about the only money police recovered from the fraud, which totalled nearly $100 million in bogus equip-ment leases. In March, 2001, the Kovals pleaded guilty to fraud, and each received a seven-year jail sentence.

The couple were released on day parole in May, 2002, and received full parole a year later. They immediately filed for bankruptcy, citing meagre assets and facing millions of dollars in claims from banks that lost money on the scam.

Ron Koval, 55, briefly had a job at a man-ufacturing company in Brantford, Ontario, but it is not clear what he is doing now. Records show that he is still in bankruptcy. Loren Koval, also 55, now goes by her maiden name, Loren Kemp. She is a marketing co-ordinator at Focus Physiotherapy, which runs a chain of clinics around Toronto. She was discharged from bankruptcy last June, even though she listed just $23,000 in assets and $4.4 million in liabilities on her most recent bankruptcy filings. When contacted, she was not eager to chat about the couple's new life: "I don't have time to talk right now. Thanks. Bye-bye."

Boaz ManorThen: headed Portus Alternative Asset Management Inc.

What happened: facing several charges of violating securities laws

Now: living in Israel, waiting to see if HE will be put in jail

Everything looked so promising for Boaz Manor at the start of 2005. Money was pouring into Portus Alternative Asset Management, the Toronto-based company he co-founded in 2003. Portus had become one of the largest hedge fund companies in Canada, with more than $800 million in assets and 26,000 clients.

It all came crashing down in February, 2005, when regulators in several provinces moved in. Within a few weeks, Portus was put into receivership, Manor took off for Israel and investors were left wondering what happened to their cash. Since then, the Ontario Securities Commission has charged Manor with several counts of violating securities laws. The charges carry a maximum penalty of five years in jail. Through his lawyer, Manor has denied any wrongdoing and promised to contest the charges.

The saga took a bizarre turn with allegations that Manor used about $9 million (U.S.) of investors' money to buy 100 diamonds in Hong Kong with the help of his sister-in-law, a mystery man and someone named Madam Ho Ho. Portus's receiver, KPMG Inc., has asked an Israeli court to jail Manor unless he produces the stones. But Manor says the diamonds are in the hands of an Israeli financier, Yitzhak Toib, who put them in a safe deposit box in a Vienna bank and refuses to give them back. Toib says he returned the diamonds to Manor's sister-in-law, and that he's being set up. Now a separate Israeli judge has ordered Toib to cough up whatever he knows; Toib is appealing. Meanwhile, Manor has been told not to leave the country until the court figures all of this out.

While Manor, 36, cools his heels in Tel Aviv, his wife, Wendy Yu, is caring for their daughter and running an art business, Fine Art Imports Inc., north of Toronto. "We have nothing to talk about," she said when contacted.

Julius MelnitzerThen: one of the top lawyers in Ontario

What happened: pleAdED guilty to 43 counts of fraud

Now: new career as a writer

Throughout the 1970s and '80s, Julius Melnitzer dazzled Ontario's legal establishment with his courtroom brilliance and stable of powerful clients, including some of the province's biggest landlords. His lifestyle reflected his prominence--three homes, a Mercedes-Benz, a Jaguar XJS, a share in a $450,000 (U.S.) Stradivarius violin, a penthouse apartment for his mistress and 11 weeks of vacation each year with his wife. He once held a lavish party, complete with $100 bottles of champagne, to celebrate the birthdays of his two dogs.

In July, 1991, a middle manager at the National Bank of Canada took a closer look at some stock certificates Melnitzer had used as collateral for a $15-million line of credit. When the certificates turned out to be fake, the bank called in the RCMP.

The police discovered that Melnitzer had printed up more than $100 million worth of stock certificates bearing blue-chip names like Exxon Corp. He'd used them to secure around $67 million in loans from several banks. Melnitzer had convinced a printing company in his hometown of London, Ontario, to make the certificates, claiming he needed to use them in an upcoming trial. Police also found out that he'd bilked several close friends out of more than $14 million by getting them to invest in a bogus property deal in Singapore.

Melnitzer pleaded guilty to 43 counts of fraud in 1992, and was sentenced to nine years in jail. He served two years before being released on day parole, and earned full parole in 1995.

Since his release, Melnitzer, 59, has written a book on his prison experience, Maximum, Minimum, Medium, and a novel, Dirty White Collar. And although he's been disbarred by the Law Society of Upper Canada, he's become a respected and widely published legal-affairs writer, covering issues such as securities laws, tax rulings and corporate fraud cases.

Andrew Rankin

Then: managing director of RBC Dominion Securities Inc.

What happened: convicted of 10 counts of tipping

Now: awaiting appeal

Andrew Rankin and Daniel Duic, boyhood friends at Toronto's exclusive Upper Canada College, went their separate ways professionally after graduating from high school. Rankin headed off to the world of finance. Duic started his own computer business, albeit while battling an addiction to cocaine.

By late 1997, Rankin had joined Domi-nion Securities' mergers and acquisitions department--dealmaking central. He soon began quietly passing tips on to Duic about pending takeovers. From 1999 to 2001, Duic pocketed $4.5 million by trading on these tips. In return, Duic showered his buddy with cash and took him on several exotic trips, paying as much as $2,000 a night in hotel bills.

In February, 2001, Duic blew the duo's cover by aggressively acquiring shares of thinly traded Irwin Toy Ltd., raising eyebrows at the Ontario Securities Commission. Within months, Rankin lost his job and Duic was co-operating with the OSC. Duic agreed to pay $1.9 million and testify against Rankin, who was charged with insider trading and tipping.

The OSC staked a lot on the case, billing it as one of their biggest ever. But after a six-week trial, Rankin was not convicted of insider trading. He was found guilty of 10 counts of the lesser charge of tipping and sentenced to six months in jail.

Rankin, 41, has appealed and is out on bail. A decision was expected in November. The OSC has also appealed.

While Rankin hasn't been able to find work since the trial, he has married. Duic, 43, has remained busy with his software company, MPX Data Systems Inc. He was in the company's Los Angeles office recently, but declined to return messages.

David SinghThen: head of Fortune Financial Management Inc.

What happened: sanctioned by the OSC and forced to sell Fortune

Now: running Destiny group of companies and selling a tax shelter

In his autobiography, The Making of Fortune, David Singh wrote about his arrival in Canada from Guyana in 1974 with $22 in his pocket. "Just over two decades later, I am a millionaire many times over." That was in 1996, when Singh's Fortune Financial Management was one of the largest financial planning companies in the country, with roughly $7 billion in assets under management and 550 advisers. But within three years, Singh's empire was facing ruin.

First, Singh and Fortune came under scrutiny over ties to a disgraced mutual fund salesman, Dino DeLellis, who was banned for life from selling mutual funds but acted as a consultant to Fortune sales representatives. Then, Fortune's star sales-man, Paul Tindall, was alleged to have sold unsuitable investments to clients and misrepresented the risks. Tindall eventually settled the allegations with the OSC, which permanently pulled his industry registration and banned him from trading securities for seven years. Finally, Singh himself faced allegations by the securities regulator that he failed to supervise Tindall. With controversy swirling, Singh was forced to sell Fortune's assets to Dundee Bancorp Inc. in 1999. A year later, he settled with the OSC and received a five-year ban on trading.

Singh has bounced back. In 2001, he started up Destiny Money Solutions, which has been described as a "knowledge-based money solutions organization offering Canadians practical, realistic solutions to the money questions they are facing." He has also written more books, including Take Control of Your Financial Destiny (which makes no reference to Fortune) and Health, Wealth & Happiness, an "inspirational" guide to wise investments and healthy eating choices.

One of Destiny's ventures is a tax shelter called Universal Healthcare Trust. It is one of dozens of so-called buy-low, donate-high programs that specialize in providing investors with big tax breaks.

These programs became popular in the mid-1990s when the federal government changed tax rules to encourage charitable donations. Here's how they work: A promoter buys a large volume of something, often art, at a discount. The promoter then arranges for clients to donate the art to charities, at a much higher appraised value, and they receive a tax break on the donation. Instead of art, Universal Healthcare buys huge volumes of medicine at a discount and then donates it at a higher market value, with investors receiving the tax break on the donated amount.

"It winds up being five or six times more than what you actually paid for [the drugs] because you are paying at cost," says Shawn Cassista, a contact person at the company, who added that Destiny has other shelter programs. "Your return is 46%."

A staffer at Destiny, now called Destiny Group of Companies, said Singh was too busy lining up seminars across the country to be interviewed.

Jurgen & Emilia von Anhalt

Then: controlled Lydia Diamond Exploration of Canada Ltd.

What happened: sanctioned by regulators

Now: awaiting trial on dozens of securities charges

Jurgen and Emilia von Anhalt claimed royal lineage through the former German principality of Saxony, and accordingly asked to be addressed as Prince and Princess. The royal couple gained infamy in 2002 when the Ontario Securities Commission filed a number of al-legations against them, including that they'd used a psychic to hunt for diamonds in Eastern Ontario. The von Anhalts dismissed this suggestion, but they were held to account for illegally selling $1.6 million worth of shares in Lydia Diamond, which they named after their daughter.

The OSC banned the couple from serving as officers or directors for 15 years, and prohibited them from trading stock for 12 years. The commission also filed dozens of quasi-criminal charges against the von Anhalts that carry up to five years in jail. The couple are contesting the charges.

Since the charges were filed, Lydia Diamond has tried to reinvent itself and the von Anhalts have divorced. Emilia has kept a low profile, but Jurgen has remarried and returned to his first love--art. He moved to Florida and recently founded Jet Art Productions.

Von Anhalt's artistic technique involves spraying paint onto a canvas with the help of a jet engine. Last July, he launched the "Millennium Jet Art Worldwide Tour" at the Pompano Beach Air Park. According to a press release, von Anhalt "created his masterpieces" while he was strapped to a hydraulic platform approximately 15 metres from a 9,500-horsepower Bombardier Challenger jet engine. When the engine was turned on, he directed paint toward a reinforced canvas. "I chose orange, yellow, blue, green, colours that are indigenous to Florida, and fiery red, a colour that symbolizes the pulsating energy of the audience," von Anhalt said in the release. It added that he arrived at the event in a helicopter and then "hopped into a Bentley." The world tour includes Rome, Paris and New York--but no Canadian dates.

Andrew Willman

Then: head of Noram Capital Management Inc.

What happened: barred for life as a broker

Now: battling angry investors

Catering to high-end clients who could see "the big picture," Andrew Willman always exuded an air of confidence. Willman was president of the Frederic Chopin Society of Canada and exhibited a taste for ornate furnishings. He and his wife, a psychology professor, hosted musical evenings in their penthouse apartment. He boasted that he rarely socialized with businesspeople because "there are other things in life, you know, besides money."

He received a rude awakening in 1999 when regulators from the B.C. Securities Commission and the Ontario Securities Commission began looking into Noram's operations. Willman's reaction was curt---he told an OSC official to "please leave me alone."

That approach didn't work. In 2000, the B.C. commission pulled Noram's registration and banned him from being an officer and director for 10 years. The next year, Willman reached a settlement with the OSC that penalized him even further. The OSC banned him for life from the brokerage industry and permanently prohibited him from serving as an officer or director. In its ruling, the OSC commissioners called Willman a "scoundrel," and said that over a seven-year period he'd misled investors, made unsuitable investments and engaged in self-dealing.

Willman shot back with an angry letter that accused the OSC of being biased. He said losses at Noram were out of his control, and that the OSC hearings into Noram were "a travesty of fairness."

The commissions' rulings were just the start of Willman's troubles. Several investors filed lawsuits against him, and last year an Ontario judge ordered him to pay them $1.6 million. It's unlikely Willman, 62, will be able to come up with the cash. He filed for bankruptcy in 2003, listing $446,000 in debts. He has yet to be discharged.

Despite all his woes, Willman has kept up his musical interests. Last year, he and his wife donated about $300 to the Southern Ontario Chamber Music Institute.

Brian Costello

Then: hugely popular financial adviser

What happened: SAnctioned by the OSC

Now: helping his son with a lawn-products business

Who can forget Brian Costello? That booming voice, those popular books, the countless columns and seminars, all providing eager investors with advice--and, sometimes, tips. Costello had enjoyed a 30-year career as one of Canada's best-known personal-finance commentators when he was hit with sanctions by the Ontario Securities Commission in 2003. At its peak, his empire included five bestselling books, spots on 180 radio stations, weekly articles in 60 newspapers and dozens of seminars every year. But the OSC put a stop to much of that when it alleged Costello promoted specific investments without being registered as a financial adviser, and that he failed to disclose "his many conflicts of interest." He was ordered to pay $300,000 in penalties and banned from giving specific investment advice for five years unless he registered as an adviser.

Costello, who lost an appeal of the OSC's ruling, has since kept a low profile. His website is defunct and he appears to spend much of his time helping his son, Brian, run a lawn-products company, BioTLC. Based in Burlington, Ontario, BioTLC says on its website that it was formed in 2003 by BKC Enterprises Ltd. That's a company Costello created in 1994, according to incorporation documents. BioTLC sells a variety of fertilizers and also offers Whey-9, "a new food supplement for dogs."

John Felderhof

Then: Bre-X Mineral's chief geologist

What happened: charged with illegal insider trading

Now: awaiting verdict on his trial

Geologist John Felderhof is the only Bre-X official to stand trial for a charge related to the company's spectacular crash. Felderhof was often the public face of the company, boasting about its gold find in Indonesia--30 million ounces "plus, plus, plus," he once said.

When Bre-X collapsed amid allegations that the discovery was a hoax, there weren't that many people for authorities to go after. The company's other main geologist, Michael de Guzman, jumped out of a helicopter in 1997. CEO David Walsh died in 1998 of an aneurysm. Most of the on-site workers in Indonesia made tracks for their homes in the Philippines.

That left Felderhof, who lived in the Cayman Islands. In 1999, the Ontario Securities Commission hit him with eight counts of insider trading and issuing press releases that misled investors. Felderhof is accused of illegally selling $84 million of Bre-X shares in 1996 while possessing undisclosed information about the company's fortunes. He was also named in a series of civil lawsuits by angry investors, and his assets were frozen by a judge.

Felderhof has always maintained his innocence, arguing that he was duped just like everyone else. His trial on the OSC charges has been among the longest in the regulator's history. It began in 2001 but abruptly ended in April of that year, when the commission tried, and failed, to get a new judge. The case resumed in 2004, and final arguments were held last summer. A verdict is expected in February, almost 10 years after Bre-X's big strike came into question. Felderhof made a couple of brief appearances during the trial, but he did not testify.

Felderhof and his wife, Ingrid, divorced in 2001, and they are battling over the family's assets, according to documents filed in court. The couple used to live in an oceanfront mansion in the Cayman Islands, but Felderhof now splits his time between Grand Cayman and Bali, Indonesia, where he has various mining interests. Under the court order that froze the family's assets, only Ingrid was permitted to withdraw money to pay for legal fees. She allegedly stopped covering Felderhof's bills last year. "I am not responsible for [John Felderhof's] liabilities or debts," Ingrid said in a letter filed in court, which was sent to Felderhof's lawyer, Joseph Groia.

Groia alleges in court filings that Ingrid is now claiming that all of the frozen assets are hers. As a result, Groia has not been paid nearly $1 million in legal fees. Groia's version is hotly contested by Ingrid's lawyer, James Chapman, who called the allegations "trumped up and scandalous."

Scott Paterson

Then: CEO of Yorkton Securities Inc.

What happened: sanctioned by the OSC

Now: heading JumpTV, an on-line ethnic television service

Scott Paterson arrived on Bay Street in the mid-1980s and immediately established himself as a superb salesman. After soaring as a rookie broker at Dominion Securities, Paterson joined Yorkton Securities in 1995 as executive vice-president. He was running the firm within three years, while still in his early 30s. Paterson drew plaudits for switching Yorkton's focus from junior mining plays to the burgeoning world of high tech. His reputation rose along with the firm. In 2001, he was named vice-chairman of the Toronto Stock Exchange.

Late in 2001, the Ontario Securities Commission began investigating the role Paterson and other senior Yorkton officials had played in some of its stock offerings. In December, 2001, the commission filed a series of allegations against Paterson. He steadfastly denied any wrongdoing, but was promptly fired by Yorkton's board.

The OSC alleged Paterson and his colleagues had played conflicting roles in several small companies they brought to market between 1997 and 2000. For example, the OSC alleged that Paterson served as a director and shareholder of some of the companies and bought shares in them while he had information that had not been disclosed publicly.

Paterson reached a settlement with the OSC on Dec. 19, 2001. He agreed to pay $1.1 million and received a six-month ban from trading. He was also barred from serving as an officer or director for two years. In a letter he sent to friends months later, Paterson insisted he was innocent and said the OSC "did not produce a single allegation of securities law violation."

Since the OSC sanctions expired in 2003, Paterson, now 42, has become involved in a dozen companies, serving as a director in some and a partner in others. His biggest venture is JumpTV Inc., which boasts of being "the world's leading subscription-based broadcaster of ethnic television over the internet as measured by the number of channels." That's around 200 channels, from 65 countries.

Paterson got involved in Toronto-based JumpTV in 2002. He became CEO in 2005 and helped take the business public last August at $5.50 per share, raising more than $70 million. Paterson's stake is worth more than $40 million--not bad for a company that in the first six months of this year had 18,000 subscriptions, less than $1 million (U.S.) in revenue and a $10.4-million loss.

Garth Drabinsky

Then: founded Livent Inc.

What happened: charged with fraud

Now: consulting and awaiting trial

By the time Garth Drabinsky and his colleague Myron Gottlieb go on trial over allegations of fraud at Livent Inc., it likely will have been almost 10 years since the company collapsed.

Drabinsky and Gottlieb first gained fame by building Cineplex Odeon into one of the largest cinema chains in North America. After an aborted attempt to take control of the company, they left in 1989. They took Cineplex's live-entertainment assets with them and founded Livent, which eventually operated theatres in Toronto, New York, Chicago and Vancouver.

Trouble began brewing at Livent in 1998, shortly after a group led by Hollywood superagent Michael Ovitz acquired control of the company. Allegations surfaced about financial irregularities, and Drabinsky and Gottlieb were forced out. Livent filed for bankruptcy protection in November, 1998, and its theatres were sold. The following year, the partners and several other former Livent executives were charged with fraud in the United States. Two pleaded guilty. As for Drabinsky and Gottlieb, the case was put on hold pending completion of a police investigation in Canada. In 2002, the RCMP filed several fraud charges against Drabinsky, Gottlieb and two other former executives.

Drabinsky and Gottlieb have pleaded not guilty and have consistently denied any wrongdoing at Livent. A trial is not expected to begin before next spring.

The pair still share an office in Toronto, and have kept busy working on a variety of projects, most notably Visual Bible International Inc., which was founded in 2002 to produce films based on the Bible. The company released its first film, The Gospel of John, in September, 2003. The Drabinsky-produced feature won wide acclaim, but its DVD sales were disappointing. With losses mounting, Visual Bible filed for bankruptcy protection in April, 2005, citing a deficit of $18.6 million. Its assets have since been sold.

The Livent legal battles, which include several civil suits, appear to have taken their toll on Gottlieb. In a statement of claim for a suit against the law firm Stikeman Elliott, Gottlieb tallied up his losses: $23.6 million worth of Livent stock, $4.3 million in lost employment income, $8.2 million in "loss of securities portfolio" and a $5.7-million loss on the distress sale of property, including a house in Toronto and a country home.

As for Drabinsky, he remarried in 2005 and appears to be coping well. He recently announced plans for a new reality show on CBC Television. In Triple Sensation, young Canadians will compete in dancing, acting and singing. "It is our hope that the talented young competitors who make it past the initial audition phase will be a collection of sexy, irrational, disarming, emotional, funny, dynamic, raw and conflicted human beings who truly reflect the multicultural fabric of Canada," Drabinsky said.

Michael Cowpland

Then: head of Corel Corp.

What happened: settled allegations of insider trading

Now: running Zim Corp.

Michael Cowpland and his wife, Marlen, became darlings of the tech scene in the 1990s--Michael for running Ottawa-based Corel Corp., and Marlen for her singular sense of style, which famously included a $1-million leather catsuit with a 24-karat gold breastplate topped by a 15-carat diamond nipple. But the party ended in 1999 when the OSC alleged that Cowpland had sold $20 million worth of Corel shares in August, 1997--a month before a sales warning that caused the stock price to drop. A year after the charges were filed, Cowpland resigned from Corel, then a major contender in office software.

Corel went into a tailspin, and Cowpland settled the OSC allegations in 2003. Under the agreement, he was banned from acting as a director of an Ontario company for two years and was ordered to pay a $575,000 penalty.

Even as the OSC settlement was being negotiated, Cowpland had already become president, CEO and majority shareholder of another high-tech venture, Zim. The fledging Ottawa-based software company went public over the counter in the United States (and hence out of reach of the OSC ruling) in June, 2003.

Zim lost $3.4 million (U.S.) last year, and revenue fell to $3.6 million (U.S.) from $4 million (U.S.). Its share price was as high as 17 cents in 2005, but sank as low as 2 cents last July. Cowpland, 63, isn't deterred. He is banking on moving Zim from text-messaging into offering "hundreds of free channels" on internet TV.

Leonard Rosenberg

Then: controlled Greymac, Crown and Seaway trust companies

What happened: charged with fraud over a massive real estate flip

Now: consulting

It's been almost 25 years since the great Toronto apartment flips, a scandal that still ranks as one of the costliest in Canadian history. It all started with the sale of 10,931 apartment units in November, 1982. Leonard Rosenberg's company, Greymac Credit Corp., had bought the apartments from Cadillac Fairview Corp. Ltd. for $270 million. He and his partners immediately flipped them, twice, for roughly $500 million.

The purchase was to be financed, in part, by loans from Crown Trust, Seaway Trust and Greymac Trust, which the partners also controlled. Regulators worried about the solvency of the trust companies and tenants were aghast at Rosenberg's plan to jack up rents by 25%. Two months after the sales, the Ontario government seized the trust companies, and police delved into allegations that the sale prices had been artificially boosted.

After more than a decade of investigations, inquiries and preliminary hearings, Rosenberg pleaded guilty in April, 1993, to 13 counts of fraud. Crown prosecutors said the fraud cost investors more than $131 million.

Rosenberg spent barely a year of his five-year sentence in jail. He was granted full parole on Oct. 31, 1994. Parole board records show he faced a contraband charge while inside that was later dismissed. Some prison officials opposed his parole, arguing in documents that they had seen an increase in fraudulent behaviour by Rosenberg and a lack of respect for rules "similar to that toward defrauded institutions." In fact, his case-management team "strongly opposed" his release on day parole. But the parole board decided that he showed remorse.

After his release, Rosenberg returned to Miami, where he and his wife, Renée, had a mansion. He dabbled in a few businesses and became a consultant to a company run by his daughter Alison, Value Holdings Ltd. It held investments in a number of companies, including a few lumber businesses in Canada, but ran out of money in 2001. Not much has been heard from Rosenberg since. He popped up in 2002 with a column in the National Post that warned about the "condo bubble."

"History has a habit of repeating itself," Rosenberg, now in his late 60s, wrote. "A word to the wise. Be careful where you invest your hard-earned money."

Sheldon Zelitt

Then: founder of VisuaLabs Inc.

What happened: busted for 11 securities violations and charged with fraud

Now: awaiting trial

There may never have been a better storyteller in Canadian business than Sheldon Zelitt. Over the years, Zelitt has claimed to be a physicist and to have served in Vietnam, dismantled a MiG fighter plane, developed a spy satellite, and worked for the CIA and the Mossad. All untrue. The biggest Zelitt whopper of all was his invention: 3-D television. His revolutionary idea captivated shareholders of Calgary-based VisuaLabs in the late 1990s, and VisuaLabs' share price soared.

Things began to unravel for Zelitt at the company's annual meeting in 2001, when he tried to pass off a Sony TV he'd just bought as his radical new invention. Some of the wires in his newfangled set weren't connected or didn't go anywhere, as company officials quickly discovered. Just as securities regulators and police began probing the company, Zelitt took off for the Czech Republic with his wife and large brood of children. Meanwhile, VisuaLabs' share price sank to pennies, wiping out roughly $300 million in market capitalization.

Zelitt was charged, tried and convicted in absentia in January, 2003. He was sentenced to eight years in prison, the longest term for a securities conviction ever handed down in Alberta. Zelitt was also ordered to pay a $1.8-million fine.

A year later, police laid fraud charges against him as well.

Czech police arrested Zelitt in May, 2004, and shipped him back to Canada after a prolonged legal fight. Since then, Zelitt, now 60, has resided at the Grande Cache Institution and has pleaded not guilty to the fraud charges. He was eligible for parole in September, 2006, but could not be released because of a pending bail hearing on the fraud charge. On Oct. 2, he was denied bail. But on Oct. 27 he got better news: His sentence was reduced to four years on appeal.

Nelson Skalbania

Then: real estate and sports mogul

What happened: convicted of theft

Now: running a solar energy company

Throughout the 1970s and '80s, Nelson Skalbania was a household name, partly for his flamboyant lifestyle, partly for his rise and fall in the real estate world, but mainly for his obsession with sports teams. Among his claims to fame are selling the young Wayne Gretzky to the Edmonton Oilers and moving the Atlanta Flames to Calgary.

Skalbania ran into trouble in the early 1990s, when a recession hit and the Vancouver real estate market tanked. In 1996, he was convicted of stealing $100,000 from a prospective partner (he eventually paid the money back, plus $4,000). Skalbania was later sentenced to one year in prison but was allowed to serve his time at home wearing an ankle monitor.

"I'm spending most of my time on energy-related businesses, a company called Solar Energy and companies related to the Kyoto Accord," says Skalbania, 68. "That's all I want to say, thank you. But I do a lot of real estate on the side."

One of those real estate projects is a ski resort near Squamish, B.C., just down the road from Whistler, a key site for the 2010 Olympics. As for Solar Energy, it trades in the U.S. over the counter. One of its projects is something called "iron fertilization," which it says is a "technology designed to stimulate plankton growth in the world's oceans as a means by which to sequester (isolate from the atmosphere) CO2."

Mark Valentine

Then: chairman of Thomson Kernaghan

What happened: pleaded guilty to securities fraud

Now: still sorting out legal issues

Mark Valentine, the son of a Canadian diplomat, was just 24 years old when he joined Thomson Kernaghan & Co. Ltd., a respected Bay Street brokerage firm. Within a few years, thanks largely to the tech boom, Valentine was one of the wealthiest brokers in Toronto and was named chairman of the firm, which also gave him a Ferrari for generating so much business.

In 2001, with the tech bubble burst, Thomson Kernaghan ran into financial trouble. Valentine, who was one of the company's largest shareholders, orchestrated a series of loans to save the firm, but also made several trades that put his own interests first. In June, 2002, the firm's management committee suspended Valentine after uncovering some questionable trades. By then, the damage was extensive, and Thomson Kernaghan folded.

Two months later, Valentine was swept up in a massive FBI operation, code-named Bermuda Short. Valentine was shipped to Florida, where he was charged with three counts of fraud over allegations he'd agreed to a stock transaction that involved paying nearly $8 million (U.S.) in kickbacks to an undercover FBI agent posing as a mutual fund trader. Valentine pleaded guilty in March, 2004, and reached a deal that saw him serve nine months under house arrest, followed by four years on probation. He was also banned from working as a stockbroker in the U.S. or Canada.

Valentine, now 36, has kept a low profile since returning to Toronto in 2004. Just before his return, he tried unsuccessfully to launch an internet service for stranded Canadian travellers called SOStravelclub.

Earlier this year, Valentine's name surfaced in a lawsuit over a Falcon airplane he and his wife used during his heyday. A company named Chell, which was connected to Valentine, owned the plane. In 2001, it was left with the Ontario company Maxwell Aero Maintenance Ltd. That's when the trouble began.

According to court documents, the plane's tail cones, worth about $325,000, went missing, and police were called to investigate. Officials at Maxwell later said they had mistaken the cones for junk and threw them away. The plane ended up in the hands of Provident Bank, which soon discovered that a $7-million (U.S.) loan, taken out by Chell and secured by the aircraft, was in default. Provident also learned that Maxwell had put a $235,000 lien on the plane to cover maintenance costs. The bank went to court to erase the lien, arguing in part that Maxwell had been negligent in losing the cones. The bank won and managed to keep the scant proceeds it recovered after selling the plane.

Madam Justice Mary Lou Benotto wants to send a message to white-collar crooks like Garth Drabinsky: Our justice system will deal with you severely. As she sentenced the former impresario to seven years in prison Wednesday, she argued that a crime like his is serious, because it “fosters cynicism [and] erodes public confidence in the financial markets.” Sternly, she noted, “Those in business must know that this must be the response.”

In fact, those in business must know Canada is a fine place to fleece the innocent and cook the books. Not for us the crusading prosecutors, the quick indictments, the speedy trials, and the lifetime jail sentences so popular in the United States.

Here, you can be pretty sure the law will take years to catch up to you (if it ever does). In the event you are found guilty, the penalty won't be so bad.

Thanks to our generous parole provisions, Mr. Drabinsky could get out of jail after 14 months or so. Not that he's going to the slammer any time soon. Not until his lawyer exhausts the appeals. “In the U.S., he probably would have been tried eight or nine years ago,” says forensic accountant Al Rosen, who thinks Canada's systematic failure to prosecute corporate fraud is a bad joke. “And he probably would've got 20 to 40 years.”

Today, after a decade of hefty legal bills, Mr. Drabinsky is so broke he has been reduced to begging money off distant acquaintances in exchange for discounts at his Yorkville art gallery. On the other hand, 10 years of freedom (and counting) may well be worth it. Journalists who began covering the Livent debacle early in their careers have grey hair now. Perhaps that explains the sense of anticlimax in the courtroom yesterday.

Compared to the obscure manipulations of Conrad Black (part of whose conviction may well be overturned by the U.S. Supreme Court), the fraud scheme carried out by Mr. Drabinsky and his partner, Myron Gottlieb, was plain vanilla. It involved an old-fashioned kickback scheme and a years-long effort to dupe the shareholders by making Livent's financial picture look far brighter than it was. The most surreal moment of the trial came when lawyer Eddie Greenspan (who also acted for Lord Black) proposed that instead of doing jail time, his client could embark on an inspirational speaking tour with the goal of urging young people to pursue their dreams in the performing arts. Had he made a similar proposal for Lord Black, he'd have been laughed right out of Chicago.

“ In the U.S., he probably would have been tried eight or nine years ago”Lord Black, unlike Mr. Drabinsky, will have to serve almost all of his 61/2-year sentence. Mr. Drabinsky could well get out of jail first. Surely, Lord Black (who stood by his old friend when times got tough) must be tempted to contemplate the unfairness of it all. After all, if Canada and not the United States had gone after him, chances are he'd still be a free man.

These days, as newly exposed Ponzi schemes spring up like ragweed, Prime Minister Stephen Harper is vowing a crackdown on white-collar crime. “These crimes have real victims,” he declared last week, “and we should have a justice system that responds accordingly.” But don't expect anything to happen soon. Unfortunately, the body entrusted with laying charges in cases such as Livent is still the RCMP, far better known for tasering the innocent than nailing the fraudsters.

“I've turned over files to the RCMP and nothing happens,” laments Al Rosen, the forensic accountant. “We just don't have people who are trained in what to look for. We have bad securities acts. We have bad sentencing guidelines. We've had some bad court decisions. We're 80 years behind the U.S. If you're a crook, this is the best place to be.”

Back in court, the judge had more tough words. “Members of the business community must be put on notice that honesty is the currency in which they trade,” she said. “If they stray, the punishment will be certain and severe.” Stirring words indeed. If only the system worked that way.